Jarmurph Ltd (JM) manufactures and markets a range of safety equipment for the leisure industry. In recent years its product range has diversified into a number of highly technologically advanced products to be used in professional sporting industries such as motor bike racing and the equestrian sector. Products are primarily sophisticated headwear protection and body protection systems, although basic products such as high visibility vests and anti-tear bodysuits still make up around 50% of its output by volume. JM had only 15 main product lines in 1988; its 2011 catalogue offers over 300 products. The problem appeared with JM is in the overall profitability. This paper aims to analyze the problems that JM face and what the solution of the problems might be.
JM has some problems with managerial accounting. Management accounting is the combination of accounting and budgetary accounting. It is supposed to produce financial information (performance measures) and any non-financial information primarily intended to help managers achieve the goals of JM. However, Ellen Stockdale, the production director of JM has stated that the accounting system does not provide any important information and often provides analysis that is contrary to the reality. For example, according to the accounting system, the clothes line of JM is not profitable and should be outsourced. But, this can’t be true as the material costs are very cheap and the automated machinery produces large amounts of finished products within a very short time span. This makes the clothes economical and profitable. Yet, the labor costs are as high as 19 pounds per hour, and this reduces the margin.